UK announces Financial Ombudsman Service reforms

The UK government has announced that the country’s Financial Ombudsman Service (FOS) will be reformed to improve efficiency of service.

The government stated that the planned changes were intended to “restore clarity in the financial services redress system, and provide greater certainty for consumers and firms”.

The changes are also meant to ensure that the FOS can deliver “simple, impartial dispute resolution” within a “clear, predictable framework”.

The announcement follows a public consultation held last year, which found that in a “small but significant” minority of cases, the FOS has acted as a quasi-regulator – something that consumers and businesses said was holding back investment.

Clearer boundaries, faster resolutions

The government has confirmed it will legislate to:

• Adapt the ‘Fair and reasonable’ test used by the FOS to determine cases, setting out that where firms have met their obligations under relevant Financial Conduct Authority (FCA) rules, they must be found to have acted fairly and reasonably by the FOS
• Introduce a referral mechanism between the FOS and the FCA to require the FOS to seek a view from the FCA where the FOS considers there may be ambiguity in what FCA rules require, or where it considers an issue raised may have wider implications across the financial services industry 
• Introduce an absolute time limit of 10 years for bringing complaints to the FOS, while giving the FCA the ability to make exceptions to this time limit
• Make structural changes to the FOS to provide greater consistency in decision-making by giving the Chief Ombudsman overall responsibility for FOS determinations
• Make it easier for firms and consumers to understand and learn from FOS decisions by introducing a requirement for the FOS and FCA to publish regular thematic reports providing useful information and clarification on how the FOS will consider certain types of complaint
• Ensure the FCA, as part of its responsibility for setting the regulatory response to mass redress events, has the tools it needs to respond to these events quickly and effectively, in the small number of cases where such an intervention is appropriate.

Financial Ombudsman complaints fell to two-year low last year.